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RE: Argus: US Refiners Holly & Frontier to Merge

Home Forums Coking News: DCU, Upgrader 1.Coker (registered users only) Argus: US Refiners Holly & Frontier to Merge RE: Argus: US Refiners Holly & Frontier to Merge

#5256

Charles Randall
Participant

 Update news from Argus see below on Merger (also news story on $3B deal @ http://news.yahoo.com/s/ap/20110222/ap_on_bi_ge/us_holly_frontier_oil_3 ).
 
I hope new HollyFrontier merger does better than the Giant & Western merger – which immediately had begin pealing off some refineries to sell that were key reasons for merger to get out of debt. Not good for small companies at bottom market without large cash positions to absorb restructure/merger cost – the $30MM savings for $3B merger disappear quickly.
 
But Holly/Frontier looks like better fit to me. and Holly will end up with 51% & Frontier with 49% of merged company so easy see who will be driver on this. According to article they would become 5th largest in behind Valero (who is selling off/shutting down capacity which will drop them below HollyFrontier eventually) and Tesoro.
 
Saw an article that says the WTI / midcontient oil glut has been caused by ~2 pipelines: Seaway 500MBD bringing WTI & Capline 1.2MM BD dumping Canadian crudes into Padd 2 Cushing area. So doubt the current glut prices are going to provide edge for any length of time. 
 
New deliveries by Transcanada Keystone P/L of Canada crude have been identified as cause for growing separation between the WTI and Brent benchmarks – growing from Brent premium over WTI of $0.63/Bbl average in 2010 to current $15.43/Bbl
(US domestic sweets are also seeing gap Louisiana Sweet grew from premium $0.93/Bbl average 2010 to current record $20.60/Bbl). Phase 3 of Transcanada/Keystone P/L is expected to drop line from Cushing into USGulf Coast by 2013.
 
COP has been been opposed to reversing the 530 mile Seaway P/L which could if reversed bring 350MBD crude into the Houston area and relieve glut/pricing issues. Seaway is operated by Enterprise & has crude storage of up to 3.4MM BBL – but glut prices will back out WTI producers shipping into glut crude markets and lead to at least partial reduction anyway – so not sure see COP/Mulva’s point this exercise.
 
Regards

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